Simply put, a mutual fund is an investment company wherein many investors like you pool in different sums of money to make up a large lump sum. The money collected is invested by the fund manager in shares, bonds and other securities - across companies, industries and sectors and in some cases, across countries as well. As an investor, you are issued units in proportion to the money invested. Since you own units of the fund, it makes you less reliant on the success or failure of any individual share, which would have been the case if you had invested directly in the shares of a single company.